The dynamic contagion of the global financial crisis into Japanese markets

Tatsuyoshi Miyakoshi, Toyoharu Takahashi, Junji Shimada and Yoshihiko Tsukuda

Japan and the World Economy, 2014, vol. 31, issue C, 47-53

Abstract: This paper investigates the risk contagion channel of the global financial crisis into Japan using daily data on bond risk premiums for the financial and manufacturing industries from July 18, 2006 to May 25, 2010. We employ a bivariate EGARCH model with the constant exogenous contagion impacts of foreign industries and the time-varying endogenous contagion impacts of domestic industries. We find evidence that: (i) a constant exogenous impact from foreign industries appears in the risk premium for 5-year bonds issued by manufacturing industry firms, and (ii) contagion only exists from the manufacturing industry to the financial industry, and that there is no evidence of any reverse causation, even during the Lehman Brothers shock on September 15, 2008. Thus, in Japan, risk transfers from foreign industries to the domestic manufacturing industry, and thence to the domestic financial industry.

Keywords: Global financial crisis; Risk premium; Sector index; Dynamic contagion (search for similar items in EconPapers)
JEL-codes: C10 G01 G12 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:japwor:v:31:y:2014:i:c:p:47-53

DOI: 10.1016/j.japwor.2014.05.003

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